THE Japanese central bank is set to embark on another aggressive bout of market intervention to hold down the value of the yen against the dollar, in defiance of requests from the US.

The prediction follows an estimated $10 billion (£6 billion) buying spree of dollars by the Bank of Japan last week, as part of an effort by the authorities to keep the yen low in an attempt to boost exports.

It is believed that Japan is aiming to keep the yen below the rate of 115 against the greenback. This week traders believe the yen will trade in the range of Y115 (62p) to Y118.

The prospect of intervention by the BoJ is high, not least because foreign investors, encouraged by the recent strength of the Nikkei index, are expected to plough into equities, for which they will need to buy yen.

Last week’s intervention involved a spectacular two-day defiance of requests from Washington. At a tense meeting between John Snow, US Treasury Secretary, and Masajuro Shiokawa, Japan’s Finance Minister, last Monday, Mr Snow broke a long American silence on the subject of BoJ interventions and made a thinly veiled demand that they stop altogether.

For two days after, the yen rose on traders’ assumptions that Mr Snow’s comments would be adhered to by the ministry. But on Thursday, in what seasoned Tokyo traders identified as the work of the BoJ, the yen began to tumble.

Traders believe that the pressure causing the yen to fall more than 1 per cent would have cost about $5 billion. The BoJ is thought to have used the same amount again to keep the yen at bay.

A dozen big Japanese banks are believed to have been buying dollars on behalf of the Bank of Japan. Some traders believe that Chase and Citigroup, two of America’s biggest banks, were also fulfilling orders from the BoJ.

Globally, currency traders reported that all Thursday night yen buyers were active.

Although the BoJ does not officially acknowledge its moves in the market, its use of many banks has also been taken by analysts as an effort to publicise the message that Japan sees its exporters as the key to its domestic recovery.

One Mizuho currency broker said: “Of course the BoJ intervention has to be kept as an official secret at this stage, but everyone on the floor knew what was going on. This was all about the BoJ sending a message to Washington.”

The expected US anger over the BoJ move will highlight Washington’s own dilemma over currencies. The Bush Administration has not officially stood down from its “strong dollar” policy, but is under mounting pressure from US exporters to let the greenback weaken and give them a fighting chance against cheap goods from Japan and China.